Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Hoban]

The corporation tax arrangements for banks are similar to those for other businesses. That is one reason why we have imposed the additional bank levy, which will raise more each year over this Parliament than the previous Government’s bank payroll tax did. It is important that the banks make a contribution to reflect the risk that they pose to the wider economy.

[Bill Esterson (Sefton Central) (Lab)]

11. What recent assessment he has made of the effect on the economy of trends in the rate of unemployment.

[Steve Rotheram (Liverpool, Walton) (Lab)]

15. What recent assessment he has made of the effect on the economy of trends in the rate of unemployment.

[The Chief Secretary to the Treasury (Danny Alexander)]

The unemployment rate has fallen recently: in the latest data, it was 7.7%—down from 7.9% on the quarter. The Office for Budget Responsibility assumed at Budget 2011 that the structural rate of unemployment was unchanged from its previous trends at 5.25%. In the medium term, unemployment is expected to fall as the economy recovers, supported by the action taken by the Government, including measures published in the Budget and “The Plan for Growth.”

[Bill Esterson]

Youth unemployment peaked in 1985 four years after the recession of 1981, with disastrous consequences for a generation of young people. When the Chancellor scrapped the future jobs fund he showed that he had not learned from what happened in the 1980s. Is not the truth that the Chancellor is out of touch with the realities of life for young people and is on course to repeat the same mistakes as the Tories made in the 1980s, with the same disastrous consequences?

[Danny Alexander]

If the hon. Gentleman was being fair, he would recognise that youth unemployment was growing substantially under the previous Government as well. The country has faced the problem for many years, which is why in the Budget we announced a £200 million package of support, including work experience placements for young people, skills training, guaranteed interviews and progression to apprenticeships. Including the measures in the Budget and the spending review, we will deliver at least 250,000 more apprenticeships over the next four years, compared with the previous Government’s plans.

Eurozone (Contingency Plans)

Bill Esterson Excerpts

Monday 20th June 2011 Commons Chamber

[Mr Hoban]

Madame Lagarde is a strong candidate for the role of director-general of the IMF. My hon. Friend is absolutely right to point out that she is French; that fact has not escaped us in ECOFIN meetings. Madame Lagarde said on “Newsnight” a couple of weeks ago that she recognised that the bail-out of Greece involved a series of agreements between eurozone countries, and that that should remain the case.

[Bill Esterson (Sefton Central) (Lab)]

The Minister has an extraordinary level of confidence—well, I think it is confidence—in the Greeks’ ability to repay the loans they are currently receiving. I just want to check with him: how much of the £19.7 billion UK contribution to the IMF forms part of the Greek bail-out and how long he is prepared to see us continue to make our contributions through the IMF?

[Mr Hoban]

I do not think the hon. Gentleman is suggesting that we should withdraw our membership of the IMF—[Interruption.] It is not clear from the question he is asking. Part of the condition of any bail-out of an economy by the IMF—whether it is a eurozone economy or another economy—is a debt sustainability plan, which is a rigorous part of the assessment process. As was clear in the Eurogroup statement last night, the IMF and the Eurogroup have signed off on Greece’s debt sustainability plan, so they expect that money to be paid back.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 10th May 2011 Commons Chamber

[Danny Alexander]

As I said in response to my hon. Friend the Member for Southport (John Pugh), one of the things we need to do as part of the listening exercise is hear the concerns about how consortia will work and ensure that the financial regime that is in place is sustainable and puts the maximum amount of resource to the front line.

[Bill Esterson (Sefton Central) (Lab)]

The Chancellor did not answer the question from my hon. Friend the Member for Gedling (Vernon Coaker), so I would like to give the right hon. Gentleman another chance. Will he repeat the bank bonus tax that was so successful last year and use that money to build the extra affordable homes, to rent and to buy, which are desperately needed by people in this country and by the construction industry, and which would be good for the economy?

[Mr Osborne]

As I was explaining to the hon. Member for Gedling (Vernon Coaker), the bank bonus tax was introduced by the previous Chancellor of the Exchequer, and it was his judgment that it would not work for another year because the banks would find a way of avoiding it. That is why we introduced a permanent bank levy not just for one year, but for each and every year. In any one year it raises more than the bank bonus tax net, so that is what we have done. It is pretty striking: Labour Members had 13 years in government to introduce a permanent bank tax; they did not do so, and they cannot carp from the sidelines now.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 22nd March 2011 Commons Chamber

The Chancellor of the Exchequer was asked—

[Bill Esterson (Sefton Central) (Lab)]

1. What assessment he has made of the effects on the economy of the trade in mortgage-backed securities and collateralised debt obligations.

[The Chancellor of the Exchequer (Mr George Osborne)]

The rapid increase in mortgage-backed securities and collateralised debt obligations contributed to a build-up of excessive and unstable levels of private debt in the UK in the years running up to the financial crisis. Although we would wish to see a properly regulated securitisation market reopened to help with lending, this must happen under a much more effective supervision regime. That is why we are abolishing the failed tripartite system and have restored to the Bank of England the responsibility for monitoring overall levels of debt in the economy. We have already established a new Financial Policy Committee to assess risks to the stability of the system, such as the emergence of excessive debt.

[Bill Esterson]

Although I accept the analysis in the first half of the right hon. Gentleman’s answer, I wonder whether the fact that financial services companies donated 51% of all funds to the Conservative party has led to a conflict of interests that prevents adequate regulation.

[Mr Osborne]

I think that I pointed out in an earlier exchange that an ex-Lehman Brothers and RBS banker contributed to the leadership campaign of the shadow Chancellor, so if the hon. Member for Sefton Central (Bill Esterson) wants to make that point again, and if you would allow, Mr Speaker, perhaps he could intervene.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

My hon. Friend is right. The mortgage market needs reform, but it needs stability as well, which is why I welcome the statement by the FSA today. It says that it will not introduce reforms this year and will take into account overall economic stability before it introduces any further changes. It has also made it clear that lenders should not pre-empt any conclusions from its review.

[Bill Esterson (Sefton Central) (Lab)]

T5. Can the Chancellor confirm that between 1990 and 1997 the proportion of tax paid on a litre of fuel rose from 59% to 75%? Can he also confirm that the proportion of tax paid then fell by more than 10% between 1997 and 2010?

[Mr Osborne]

What I can confirm is that Labour left us with six duty rises. Now they are wriggling desperately to find some excuse to get off the hook they put themselves on.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 21st December 2010 Commons Chamber

[Danny Alexander]

The hon. Gentleman makes an important point. As for the politics of the matter, it was, of course, the previous Government who oversaw a massive expansion of PFI. It does not come well from the hon. Gentleman and other Opposition Members to be criticising an approach that ballooned under the previous Government.

[Bill Esterson (Sefton Central) (Lab)]

My constituent Jeanette May wrote to me recently about the cancellation of the PFI at Maghull prison in my constituency to say that cutting the prison will affect the local economy, especially the immediate population. Does the Chief Secretary understand the impact that cuts such as the cancellation of Maghull prison will have, and how they will hit jobs and growth in communities across the country?

[Danny Alexander]

I am bound to say that that is yet another example of a saving that is necessary to tackle the terrible inheritance left by the previous Government, which Opposition Members now seem to be opposing. They also oppose every single cut, yet do not recognise that the consequence of such an approach would be to put this country back in the economic mess that they caused.

Autumn Forecast

Bill Esterson Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

We avoided the increase in the small companies rate that the previous Government wanted to introduce even in a recovery. We have been able to avoid the damaging part of the jobs tax. Of course, my hon. Friend is absolutely right. The forecast in this report and the forecast from many other people is for jobs to be created in the private sector across the country, including in the north-west—a part of the country that both of us represent in the House. Frankly, one can see again today that the Labour party wants to talk down the economy, does not believe independent forecasts and talks down the regions. It is no wonder that people rejected it at the election.

[Bill Esterson (Sefton Central) (Lab)]

Was the Chancellor talking a “complete load of nonsense”, as he put it earlier, when he said:

“Look and learn from across the Irish Sea…What has caused this Irish miracle, and how can we in Britain emulate it?”

Does he recognise that a private sector recovery has not happened in Ireland? Why should following the same policies be any different here?

[Mr Osborne]

If the hon. Gentleman cannot tell the difference between the economic situations in which Britain and Ireland find themselves today perhaps he should not turn up to these events.

I just make this observation. This is an independent report, produced by Robert Chote. [Interruption.] I have had a lot of chuntering from Opposition Front Benchers about the independence of the Office for Budget Responsibility. We set it up on an independent basis and we have given all members of the Treasury Committee the right to approve or reject the members of the budget responsibility committee. We will see whether Opposition Members, including Front Benchers, support this legislation when it comes before Parliament. At the moment, it does not sound as if they will support it, but perhaps they will change their minds.

Savings Accounts and Health in Pregnancy Grant Bill

Bill Esterson Excerpts

Monday 22nd November 2010 Commons Chamber

[John Hemming]

The point is that spending £7 million to give £2 million is an appalling waste of money. Anyone who votes for anything like that will have a real stain on their financial track record, because people will observe the Opposition saying, “This is so important that we have do things in this inefficient way.” It is a ludicrous proposal.

[Bill Esterson (Sefton Central) (Lab)]

The hon. Gentleman has talked about ISAs replacing the child trust fund as a way of saving for children. Does he appreciate that ISAs are often related to stocks and shares and that their value can go down as well as up? I do not see the difference in what he proposes.

[John Hemming]

At this point, I should declare my interest, which is on the Register of Members’ Financial Interests, as the chair of a company, John Hemming and Co., which provides software to ISA providers. I understand how ISAs operate and that the value of ISAs that are exposed to the stock market can go up as well as down. The difficulty with the child trust fund is that it is relatively small and that there is a great challenge in managing small funds. As a proportion of the fund, the 1.5% charges rate is higher than that for many other funds.

--- Later in debate ---

[Mr Hanson]

There are two points about that. I do not wish to cause the hon. Lady any difficulty, but I think that her intervention relates to the previous group of amendments, on the child trust fund. We are now talking about the saving gateway account, which is for poorer people. It does not relate to people under the age of 18, and if she looks at Hansard, I think that she will realise that she is talking to the previous group of amendments.

However, I should also say that if the hon. Lady thinks that the current financial situation is difficult, I look forward to her supporting amendment 13 in the Lobby, because it would give the Minister time to reflect. Amendment 13 says that we should delay scrapping the saving gateway until 2014. We have had the saving gateway account—which the Minister and the Liberal Democrats supported in opposition and which Labour supported in government—which has had its pilots. The pilots have proved successful, and by any assessment more people have saved, resources have been generated and people on low incomes have learned the saving habit. The Bill abolishes the saving gateway account that was to be implemented in July this year, until the Minister put that on hold.

Two amendments are the focus of the debate. Amendment 2 would delete clause 2, so that the saving gateway account would not be abolished. However, I am being pragmatic, and I tabled an amendment to abolish the saving gateway account on 1 January 2014. That would provide a three-year gap in which the Minister could, as the hon. Member for Truro and Falmouth (Sarah Newton) said, look at the economic situation and assess whether the financial contributions are practical and desirable. I happen to believe that they are, and that the scheme is affordable now, but I will park that debate for the moment, and simply tell the Minister and the hon. Lady that if they accepted amendment 13, they would accept minimal cost, if not almost no cost, to the Treasury. All that would be abolished, effectively, is the pilots, and their assessment. The saving gateway scheme has not started, and there would be no financial contribution to it because it did not commence in July 2010.

The Minister could accept amendment 13 and not commence the scheme next year. He could accept it and not commence it in 2012, or 2013. He could make an assessment in 2014 of the principles that he espoused in Opposition with his hon. Friend the Member for Taunton Deane—that the scheme is a positive one that brings benefits. If the economic situation improves during those three years—the Minister presumably believes it will as a result of his other economic policies—he could consider returning to the saving gateway scheme without repealing the Saving Gateway Accounts Act, which is what the clause will do, and end any possibility of the scheme being introduced.

I am offering the Minister an opportunity. He need not abolish the scheme, but could reflect on it. He could delay its commencement until 2014, and not rip up a scheme that he supported in opposition, and on which valuable work was done in five areas in the first pilot, and in those areas plus south Yorkshire in the second pilot.

The Minister has a duty to explain why he believes the scheme should not progress now. If the reason is finance, amendment 13 provides the opportunity to reflect on that. The Opposition would swallow our pride and support him in not having the saving gateway scheme starting this year, next year or the year after. That would be a big step for us, but we might consider it if he would accept amendment 13.

[Bill Esterson]

Is not the truth about the Government’s position on the saving gateway that if they were serious about using it as part of tackling the deficit, as the hon. Member for Truro and Falmouth (Sarah Newton) said, they would support amendment 13 and delay repeal of the 2009 Act, because improving the financial habits of people from the poorest backgrounds is part of what the coalition Government say is their solution to the country’s financial problems?

[Mr Hanson]

I thank my hon. Friend for his intervention. He emphasises that amendment 13 would not cost the Government anything. If it cost anything, it would be a minuscule amount to maintain the scheme because it has not yet started. The Minister froze it, and said that he would not start it in July 2010, as planned by the previous Labour Government. All the expense to date has been on the pilots in phase 1 and phase 2. I remind him that the legislation had his support and that of his hon. Friends the Liberal Democrats without a vote on Third Reading, and with warm words being spoken by them in Opposition. The situation now—it is self-evident to my hon. Friends—is that we have a scheme that is on the statute book and that has been successfully piloted but has not commenced. Amendment 13 gives the Minister the opportunity to delay its commencement until at least 1 January 2014.

If the situation improves and the Minister’s economic policies ensure that we tackle the deficit, build a strong economy, recoup our money from Ireland and consider all the issues that we have talked about during debates on the economy over the past few months, he will be able, if he wants, to go back to his electorate in Fareham, Truro, Falmouth and everywhere else and say, “Not only have we helped to tackle the deficit, we have not hit poor people in doing so.” He will have secured a scheme that he can continue to implement because he will be able to repeal the 1 January 2014 date later. Presumably, both the Liberal Democrats and the Conservatives thought that it was a good thing in February last year, or they would have voted against it on Third Reading, and would not have used such warm words to describe it from the Opposition Dispatch Box.

--- Later in debate ---

[Paul Maynard]

I welcome this opportunity to express my views on the concept of saving gateways. I listened with interest to the shadow Minister expressing his desire to save them for the future, but in his defence he missed some of the key pieces of evidence that we heard in the Bill Committee. I should like to remind him of some of that evidence. Adrian Coles, director general of the Building Societies Association, told us:

“No building society had committed to offering a saving gateway”.

Eric Leenders, executive director of the British Bankers Association, said that there were

“only a couple of providers who felt that it was suitably beneficial for them to provide the account”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.]

The Post Office would participate only if provided with taxpayers’ subsidy. It will cost £300 million to continue with the scheme.

There was a great deal of debate in Committee about the possibility of the fourth link in that chain being credit unions, and I pay tribute to the hon. Member for Makerfield (Yvonne Fovargue) for her assiduous advocacy of their cause. In a way, she was quite right. I was impressed to hear how many credit unions there were in Makerfield. I think she said that there is one at the end of almost every street, or certainly within walking distance for most of her constituents. We have a very successful one in Blackpool, too, but they would not be available for this purpose in the many parts of the country where the credit union movement has yet to implant itself fully, so we would be left with the kind of postcode lottery against which the shadow Minister was fulminating in the previous debate. We cannot have it both ways.

[Bill Esterson]

The hon. Gentleman describes a lack of credit unions in certain parts of the country, which is precisely why the opportunity to have the saving gateway is so important. Does he not appreciate that Government input into helping lower-income families to save is exactly what is needed to provide the necessary impetus?

[Paul Maynard]

Unfortunately, the hon. Gentleman’s point was not borne out by the evidence of Mark Lyonette of the Association of British Credit Unions Ltd. He was quite clear when he said of the saving gateway:

“None of the credit unions built their business plan around it, so I don’t think its withdrawal is a threat to the health of credit unions.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 52, Q149.]

It is important to ensure that we give credit unions what they want, and that is why we are seeing reforms to the Credit Unions Act 1979 enabling them to work with more than just individuals—they will now be able to work with interest groups, social enterprises and the like. We should not therefore allow the Opposition’s statement that credit unions have to be involved to obstruct the fact that this scheme will cost £300 million to continue. This might cause some Opposition Members to roll their eyes and shake their heads, as they did earlier in response to my hon. Friend the Member for Truro and Falmouth (Sarah Newton), but we are now living in a very different fiscal situation. The shadow Minister was quite right: the Government have changed, and we now have to take tougher financial decisions. We cannot justify spending £300 million on a saving gateway that will not be universally accessible across the country because there simply are not enough commercial providers willing to provide it. This is not a debate about a group hug, or about trying to encourage everyone to save more. We all know about those things.

I have been delighted to hear the hon. Member for Makerfield talk about Brighthouse, of which there is a branch in my constituency. I almost thought that she must have sneaked into my surgeries, because her tales about her voters’ problems with Brighthouse were the same as mine. However, I do not think that the saving gateway is the answer to the problems that many poor people face in getting access to cheap credit. It is not the answer to the problems we have been discussing. It fails the test that I raised on Second Reading—a test that I call my rhododendron test. The Opposition have a tendency to fixate on a single item of legislation that they believe will somehow solve all the problems in the world, but I am afraid that the saving gateway, however popular the pilots might have been, has not been popular enough with the providers that we need to ensure its success. That is why I support the Government’s decision to remove the scheme.

--- Later in debate ---

[John Hemming]

If there were an amendment to say that we should delay it until it is instituted by order, I would find that more reasonable, but I do not think we should set a date in the future. If there is not sufficient independent evidence that this scheme achieves a result and there are good arguments to show that there are better ways of helping people in these circumstances, I would press the Government to consider them and work with organisations such as the credit union movement to ensure that everyone has access to accounts, is encouraged to balance out their financial positions and gain wider access to crisis loans.

[Bill Esterson]

The hon. Gentleman did not answer the question about why there was such a change of heart. When the figures came out after the election, they showed that borrowing was £20 billion lower than had been assumed before the election. That could not have been the reason for the change of policy.

[John Hemming]

The hon. Gentleman ignores the fact that there was a sovereign debt crisis in Greece and that we need to learn from circumstances. If we do not do so, we will face great difficulties. We have a saving of some £100 million-plus on a scheme viewed by independent experts as not being the best way to use that money. There is no independent evidence that it even achieved its objective, save perhaps for reducing the amount of money people spent on restaurant bills when eating outside the home or on takeaways. That is what the IFS drew our attention to at the evidence session. If we are serious—and we are—about ensuring that the Government keep the interest rate on sovereign debt down so that we avoid ending up with the problems of Greece or Ireland, we must take that into account.

Yes, I accept there is a job to be done: we need to look after people on lower incomes and ensure that they have access to funding systems so they can balance their finances when they incur higher expenditure. We also need to encourage people to save where appropriate, but it is not always appropriate to do so. As I mentioned, the Royal College of Midwives said that a mother who has just given birth should not be concentrating on saving all her money; she needs to focus on eating well. On that basis, the proposals represent an entirely sensible and reasonable way of reducing the amount of money that the country has to borrow.

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[Sheila Gilmore]

I was not being dismissive of advice; I said that it is not enough in itself. To suggest that it can be a substitute for something like the saving gateway is to miss the point—the real nudge, or the real incentive, that comes from the matching.

It has been suggested that there were not enough outlets for people to use the saving gateway, but the housing association movement was very interested in it and had a great deal of discussion about how it could become, in effect, a front end for people who wanted to save through the saving gateway scheme.

[Bill Esterson]

Does my hon. Friend agree that although advice and budgeting are important, one problem in society is the lack of good financial education? For people on very low incomes, it is difficult to find a means of saving. That is the whole point about the saving gateway and credit unions; otherwise, there are not the accounts or mechanisms for people on low incomes to save.

[Sheila Gilmore]

Indeed; I agree with my hon. Friend.

My point about the housing association movement is that the people who say that there are not enough outlets to make the saving gateway really work are not sufficiently prepared to look at some of the things that already exist. I firmly believe that we could have built the scheme up. If tenants could have agreed to small savings being taken at the same time as they paid their rent, for example, which would then be passed over to the provider—whether it be a credit union or another organisation involved in the saving gateway—that would have provided a relatively straightforward and easy-to-access method for those tenants. Housing associations, which see themselves as having a wider role than simply being a landlord, felt that this would have been helpful for their tenants.

We hear so much of “We have to do this because of the deficit.” We are told by the coalition Government, “We had to change our minds about all these things”—in fact, both Government parties did not support all these proposals, although they did support the saving gateway scheme—“because of the financial situation.” We have two different views about how to get out of a recession. The Government parties did not just want to pay down a deficit which they suddenly claim not to have known about before, although they did know about it and, as was pointed out by my hon. Friend the Member for Sefton Central (Bill Esterson), it had in fact been falling. They decided to reduce that deficit speedily, within five years, regardless of the consequences. There is another choice, although the Government may not agree with it.

The Government say to us, “You cannot support child trust funds or any of the other measures involved, because if you do, you will not reduce the deficit.” That is not the case. We take a different view on the economy. Our view is that the deficit should be reduced far more gradually. That was also the clear view of the Liberal Democrats as recently as late April: they said that fast cuts would be exceedingly dangerous. I do not see what has changed since then.

Ireland has been mentioned yet again. It cut public sector salaries and services, and it cut very hard. Indeed, only a few months ago it was being set up as a model in that regard. However, it has not got itself out of its financial difficulties.

We believe that if we reduced the deficit more slowly, two things would happen. First, we would be able to make choices about the things that are important, and I believe that the saving gateway would be one of them. Secondly, if we did not cut so drastically, unemployment would not be as high, which would mean more money for the Treasury, and we would not have a growing deficit problem. I firmly believe that if we proceed with the Government’s proposals the deficit will not be reduced as fast as they would like, despite the cuts, and it may actually increase.

We believe that those choices exist, and that the saving gateway is important because of the advantage that it brings to low-income families. It represents a long-term and real effort to change behaviour and improve the circumstances of such families, and that is why we want to retain it.

--- Later in debate ---

[Mr Hoban]

If the hon. Lady reads the comments of international organisations such as the OECD, the International Monetary Fund and the European Union, and those of rating agencies such as Standard & Poor’s, she will find that mainstream opinion agrees with the Government about the need to take action now to tackle the deficit in order to avoid the crises that we are seeing elsewhere in the world. All that we hear from the Labour party is “Let us delay the difficult decisions. Let us go into the election with the structural deficit, and try to deal with it in four or five years’ time rather than now.” That has been the theme of Labour Members’ contributions throughout our debates on the Bill. They have denied the need to tackle the deficit now, and have ignored the lessons that are being presented all around us.

[Bill Esterson]

Will the Minister give way?

[Mr Hoban]

Let me make some progress and explain why we are repealing the Saving Gateway Accounts Act 2009. The repeal is part of our deficit reduction policy. The right hon. Member for Delyn (Mr Hanson) quoted from my Second Reading speech. It was the third time that I had heard him use the same quotation. Let me now, for the third time, expand a little on what I said on that occasion. I said:

“The pilot scheme demonstrated some benefits, but it demonstrated some challenges too… What are the long-term benefits? What are we getting in return for the quite generous bonus that we are giving to savers?.. In the second pilot, questions were raised about whether the scheme was effective… First, there was no statistically significant evidence that, in delivering genuinely new savings, the saving gateway accounts delivered higher overall net worth.”

I referred to a

“number of anecdotes, rather than hard evidence, used to support the proposal”,

and added:

“It appears that money was moved from one set of savings to another, perhaps from a current account to a savings gateway account, simply to secure the Government match.”—[Official Report, 13 January 2009; Vol. 486, c. 145.]

While accepting the principle behind the saving gateway account, we nevertheless flagged significant concerns about its effectiveness.

The right hon. Gentleman mentioned the pilots. According to the conclusion from the second pilot,

“when we look at a broader measure of net worth (including investments as well as all cash deposit accounts), there is no statistically significant evidence that funds held in these forms have increased… we nevertheless do not find statistically significant evidence of an increase in overall net worth among this group.”

Carl Emmerson said in his evidence to the Committee:

“There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households.”––[Official Report, Saving Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18, Q42.]

Given the fiscal constraints that we face, we must question the value for money to be obtained from this project. It would be nice to be able to proceed with it, but the evidence suggests that it does not increase saving and does not possess the benefits ascribed to it by Labour Members. Not only is the evidence of its effectiveness in question, but it would cost more than £300 million over the next five years, which makes it unaffordable in the light of the need to reduce the deficit.

The other strand of the argument, touched on by the hon. Member for Makerfield (Yvonne Fovargue), is access. Who would be able to gain access to the saving gateway account? My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) echoed Adrian Coles, the director general of the Building Societies Association, who said that

“no building society had committed to offering a saving gateway account”.

Eric Leenders of the British Bankers’ Association said

“there were only a couple of providers who felt that it was suitably beneficial for them to provide the account.”

The banks that said they would provide accounts were Royal Bank of Scotland and Lloyds. The Post Office would take part in the scheme only if it received more taxpayers’ money.

I do not think we would have seen the easy access that the hon. Lady believed to be a key part of the scheme’s attraction. The only credit union outlet in my constituency is in a deprived area, and is open for only a short time each week. In my constituency, credit unions would not have been a vehicle for access to the saving gateway account.

Given that we do not intend to proceed with the scheme, we should leave no room for uncertainty among financial institutions or advice-giving bodies, and the best way in which to be clear about our intentions is to repeal the 2009 Act. I believe that if a future Government revisited the scheme, they would design it very differently. If the right hon. Gentleman wishes to press his amendment to the vote, I will ask my hon. Friends to oppose it.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Osborne]

I agree with part of what the hon. Gentleman said. It is important that the utility companies—the gas companies—are as quick to pass on to their customers the cuts in the wholesale price of gas as they seem to be in passing on increases. We are looking at the whole electricity market—because, of course, many pensioners receive their heating through electricity—and considering what we can do to better insulate people from price fluctuations that can cause havoc to family budgets.

[Bill Esterson (Sefton Central) (Lab)]

3. How many child trust funds have been set up in respect of looked-after children since such funds were introduced.

[The Economic Secretary to the Treasury (Justine Greening)]

Local authorities report to Her Majesty’s Revenue and Customs all children coming into their care, and if a child does not already have a child trust fund, one is opened for them. Between April 2005 and April 2009, HMRC opened child trust fund accounts for 16,676 children.

[Bill Esterson]

Does the Minister agree that improving the life chances of all looked-after children should be an absolute priority for the Government, and will she consider supporting the amendments tabled to the Savings Accounts and Health in Pregnancy Grant Bill that address the issue of child trust funds for looked-after children?

[Justine Greening]

As the hon. Gentleman is aware, we are taking legislation through the House to get rid of the child trust funds. We think it is vital to support looked-after children, but the question is how best to do that while also tackling our fiscal deficit. We have come to the conclusion that what looked-after children need is support today, and that is what we will provide. Over the spending review period, £7 billion will go to supporting the most disadvantaged children in our country, including looked-after children. He will be aware that in the Department for Education, Eileen Munro is leading an inquiry into how social care can work better, including the support of looked-after children, and finally he will be aware that my hon. Friend the Financial Secretary will be considering proposals to bring forward a junior individual savings account, from which we will specifically ensure that looked-after children can benefit.

Savings Accounts and Health in Pregnancy Grant Bill

Bill Esterson Excerpts

Tuesday 26th October 2010 Commons Chamber

[Stella Creasy]

With respect, I have given way once.

We do not need to wait until 2028 to see the impact that such funding will have on the choices that young people could make. We know that in 2020 the first generation of child trust funds will mature. That means there will be 18-year-olds with access to £3 billion of investment for our nation. That may not be the riches of Croesus that some on the Government Benches will be able to bequeath to their children, but for the families that I work with in Walthamstow those first funds maturing in 10 years will transform the choices that their children are able to make.

In the context of the other debates that we have had in the House recently—on tuition fees, home ownership and entrepreneurship—we all know the difference that that kind of money will make. Putting that £3,000, the lowest sum, into context, it is worth reflecting that evidence shows us that parents are spending on average £4,000 on financing their children through university. We know, too, that more than half of 25 to 34-year-olds still rely on their parents for financial help. With tuition fees set to rocket under the present Government, that debt, that dependency and that distress for the parents concerned are only set to rocket.

Countless research studies show us that low income families aspire to saving for the long term, and that they want a nest egg for their children. The child trust fund is helping to make that ambition a reality, with almost 30% of the children who get the child trust fund also getting the top-up endowment of £500, meaning that their nest egg will be even bigger.

[Bill Esterson (Sefton Central) (Lab)]

My hon. Friend makes a good case for the evidence for saving, particularly in low-income families. Is she aware of the House of Commons Library research that predicts a £4 million saving from the abolition of the three schemes, which compares rather unfavourably with the amount to be saved by the levy on the banks? Will she comment on that?

[Stella Creasy]

I thank my hon. Friend for that question. He precisely answers the point that many on the Government Benches wish to raise about where else money could be raised. There are ample other ways that we could raise money to reduce the deficit, such as the bankers levy.

Finance (No. 2) Bill

Bill Esterson Excerpts

Monday 11th October 2010 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

That was a fascinating exposition of small town, small business socialism, a political philosophy that I have never come across before. I am not sure how much of it will have been welcome to Labour Front Benchers.

I intend to follow the example of the Exchequer Secretary who opened the debate—rather than that of the shadow Chief Secretary—and speak briefly on this brief technical Bill. It is much briefer than many of the other Finance Bills I have seen in my five years as an MP. When I was new to this place, the Liberal Democrat Whips Office inflicted cruel and unusual punishment on me by putting me on the Finance Bill Standing Committee as training in how to operate as an MP. It seems that it is my luck to serve in that way again five years later. To new MPs who may be similarly blessed by the Government Whips Office this time, I can say that it is exceptionally good training. If they can survive the Finance Bill, they will be well prepared for any other legislation in Committee.

This is a small and technical Bill, much of which is familiar ground to me from my professional career before I became an MP. I dealt with capital allowances, venture capital trusts, enterprise management incentive schemes and group relief. I am not so familiar with the taxation of the earnings of seafarers or the workings of petroleum revenue tax, and perhaps the Economic Secretary will give us all a tutorial on those in the exciting Committee stage of the Bill to which some of us may look forward.

As the chairman of the all-party parliamentary group on smoking and public health, I welcome clause 23, which refers to long cigarettes. The hon. Member for Luton North (Kelvin Hopkins), who is no longer in his place, mentioned that it would be wise for the Government to invest in more measures to combat the smuggling of cigarettes and the avoidance of duty by some by cutting long cigarettes into two.

The Bill has to be seen against the background of the deepest deficits among developed countries. Contrary to what the hon. Member for Bassetlaw (John Mann) said—I tried to intervene on him at the time—it is a fact that the deficit that this coalition Government have to tackle is the largest among the larger economies in the world. It is larger than that of the US and Japan, as well as those of the so-called PIGS countries, including Spain and Greece—[Interruption.] Yes, it is larger as a proportion of our economy. Our budget deficit is more than 10% of our GDP and is higher than those of all the countries that I have cited. That is the serious issue with which the coalition Government have to get to grips. We have made some tough choices on taxation, which were the subject of detailed debates after the Budget, and we have some tough decisions to make on expenditure next week. The Government are making those tough decisions, and we are not avoiding the adverse consequences and political hostility that may come our way. We are being responsible, and not avoiding the issue as Labour Front Benchers are doing. They are denying their responsibility for the mess we are in and even scrabbling about to bring in what must have seemed very clever quotes from Wikipedia on the Boer war and Lord Kitchener earlier this afternoon. We are taking the deficit seriously and we are putting in place the measures that are needed to tackle it.

[Bill Esterson (Sefton Central) (Lab)]

Is it responsible to follow the policies adopted in the Republic of Ireland, which have seen the deficit grow, not fall? Those policies are similar to those advocated by this Government.

[Stephen Williams]

All countries, whether in the EU or elsewhere, are having to put forward measures that are appropriate to their domestic circumstances. The circumstances of a small country of about 3 million people such as Ireland are completely different, and we will have to evolve our own response. My point is that we are in a desperate situation, as bequeathed to us by the previous Labour Government. We are taking that challenge seriously and not shirking the difficult decisions that will have to be made to put our economy and public finances back on track so that we can make the sensible investments in public services that we all wish to achieve.

--- Later in debate ---

[Mr Binley]

As the founder of two small businesses, I can tell the hon. Lady that investment benefits are not the major concern. The major concern is the ability to get money from the banks to act as working capital. I can see that the incentives those benefits provide are helpful, but they are not the core problem that small businesses are facing at the moment. The truth is that the Government will have to review a number of areas of policy in order to deal with the core problem.

I was saying that the banks were building up their capital assets to a dangerous degree. J. P. Morgan has recently announced new rules that will increase its risk-weighted asset base by 25%. Research also suggests that Barclays will achieve an even greater increase, of some 44%. Of course banks must be soundly based and properly regulated, but we have to get the balance right. All the evidence suggests that the capital reserve build-up has a sizeable detrimental effect on the ability of SMEs to capitalise on growth opportunities. As I said earlier, that will threaten the Budget strategy, unless the Government deal with the problem, and I hope that the Economic Secretary will come back to me on this matter.

Research by the Federation of Small Businesses suggests that 24% of SMEs are already having difficulty coming to terms with current increases in the cost of money, and the new capital requirements will compound that situation. This could not come at a worse time. More businesses are in danger of going to the wall through overtrading during the upturn than folded during the downturn.

[Bill Esterson]

I welcome the hon. Gentleman’s comments about the difficulty that small businesses are having in getting access to money from the banks. Does he agree that there will be a danger to small businesses if too many people in the public sector lose their jobs, because they are important customers of those businesses? The effect of that could represent just as great a danger as the problem he has outlined.

[Mr Binley]

I do not agree with the hon. Gentleman. The truth is that the previous Government were so profligate as to create problems for our children and grandchildren, and I find that immoral. I do not want that to happen to my children and grandchildren, and the only way to deal with financial difficulties in a business, a family or any other organisation is to cut spending and earn more money. There is no other answer, and the sooner the Opposition recognise that, the sooner the people of this country will listen to them a little more.

--- Later in debate ---

[Bill Esterson (Sefton Central) (Lab)]

I want to start by discussing some of the comments made by the hon. Member for Watford (Richard Harrington). He talked of total denial among Labour Members about what has happened, but probably demonstrates the same himself on behalf of the Members around him. The figures on unemployment, repossessions and business failures in my constituency this year and over the past two years during the recession are roughly half those on unemployment, repossessions and business failures during the Tory recession of the 1990s. Many Members on both sides of the House will have found that to be the case. The reason for that is the support given to families and businesses during the most severe recession since the 1930s and a decision to look after the human side at a time of greatest peril. I am afraid that that factor is in danger of being missed by this Government.

The decisions taken in this place, which my hon. Friend the Member for Wirral South (Alison McGovern) commented on, affect people’s lives as they go about their everyday business. We need to consider that; this is not just a series of numbers. Some Members on the other side of the House operate as if the cuts in spending and child benefit and the rise in VAT are just numbers, but the effect is very real for millions of people out there, and it is that effect that really counts.

The hon. Member for Watford also mentioned the multiplier effect. I see he is no longer in the Chamber— [Interruption.] He has moved seats; I apologise. The point about the multiplier effect is that it is key to providing the stimulus that will allow the economy to grow and the deficit to be cut. Only by growing the economy can we possibly have any hope of cutting the deficit.

It is the role of Government in a recession to step in and support the economy until the private sector is strong enough to take over. The reality is that, at this stage, the private sector in much of this country is not strong enough to take over, step in and replace the Government in growing the economy. That is why the issue is one of timing: how soon we make cuts and how quickly we can pay off the deficit. That is an important point, alongside the impact on people’s lives.

[Chris Heaton-Harris (Daventry) (Con)]

Does the hon. Gentleman not recognise that the Government can grow the economy only with money already paid to them in tax? We therefore desperately need the private sector to be kicking off, and the Government cannot replace the private sector.

[Bill Esterson]

The hon. Gentleman makes an important point that is often made by Conservative Members, but if the private sector is not strong enough to step in and support the economy, that approach does not work. Only when the private sector is strong enough can it step in and behave in the way that he describes. At this stage, the recovery is so fragile that my concern is that we will follow what has happened in Ireland and slip back into recession unless we get this absolutely right.

It is crucial that the timing is right, which is why the Chancellor is now considering a return to quantitative easing as advocated by the Governor of the Bank of England. It is interesting that the Chancellor is looking at increasing the amount of money in the economy, which is done by borrowing—the other way of doing this. Even the Chancellor recognises that we have to get this decision right at this stage of the economic cycle.

History teaches us many lessons. In the ’30s, and to some extent in the ’80s and ’90s, the then Governments decided to cut hard and fast. What happened was what we have seen in Ireland over the past three years: the economy grew smaller, and it grew harder to pay off the deficit, not easier. The lessons are there for us if we wish to learn from them. I hope that the Government will learn. As I have said, there are signs that the Chancellor is learning some of those lessons.

I also want to talk about the value of investment in capital projects. Tonight, some Members have talked about the way that many projects were implemented over the past few years. As I have shown by referring to low unemployment and low rates of business failure and home repossession, those investments in capital projects—not least the Building Schools for the Future programme—benefited local economies very much by providing work and business for many small and medium-sized enterprises. It is important that we keep that kind of capital spending going, which is why it was so wrong that the Government cut Building Schools for the Future and many other capital programmes when they came to office.

The primary capital programme is another such example, and I raised the playbuilder programme in Education questions earlier today. There are also schemes such as the Thornton relief road in my constituency. Road projects are a great example of how a stimulus can be very effective in a short time, through the multiplier effect, which was mentioned by the hon. Member for Watford, who has now left the Chamber. The way to pay off the deficit is by getting that stimulus in place now until the private sector is strong enough, and not to go back into recession, where the deficit will only grow.

A number of Members have mentioned the role of the banks and how they are operating at present. I have seen that myself as a number of constituents have described the circumstances that they face. Banks have been calling in loans and overdrafts at a moment’s notice, using the small print, which they always reassured business owners they would never do. In some banks, the debt collection department often steps in and threatens business owners with either having to repay at a moment’s notice or pay punitive interest rates. All that goes on without the relationship side of the bank knowing that it is being done. I have already had a number of examples of that in my constituency.

The behaviour of the banks also needs to be tackled, and I am pleased to hear that Members on both sides of the House, having experienced this through their constituents, are determined to take action. However, there is also the issue of the responsibility of the banks for creating the global financial crisis in the first place. We need to tackle that and ensure that it never happens again. We also need to ensure that those responsible for the scale of the crisis through irresponsible lending to people who could not possibly repay their loans and disguising that by using complex financial instruments are made responsible. We must come up with an effective way to deal with that in the long term.

I know that there has been discussion in Government circles of the international banking levy, and I would be interested to hear what Ministers have to say on that issue. My understanding is that they do not propose to go anything like as far as President Obama, but the opportunity should not be missed, because if we can get decent international co-operation on the level of levy that should be brought in, we have a chance of putting the international financial system in a far stronger position for the future, of finding a way to invest back in the global economy, and of ensuring a robust and lasting recovery.

A levy on banking transactions is a far fairer way of tackling the deficit than the kind of cuts being proposed. People to whom I speak in my constituency do not see how cutting child benefit or tax credits, or putting up VAT, will help to cut the deficit; they see it as taking money out of the economy and feel that they are not being supported. That makes them less likely to spend the money that will, ultimately, help businesses to get back on their feet. They do not see why people on middle and low incomes should shoulder the burden of sorting out the financial problems caused by the major financial institutions, and that is why we need to work closely with partners at an international level to sort things out.

I want to talk about why I think that some of the moves made by the Government will make it harder for us to cut the deficit and will, in fact, have the opposite effect to the one that the Government claim for them. As we have heard Members say, scrapping regional development agencies has a clear implication. By going from eight organisations to 58, it seems to me—this is also being said by business leaders, certainly in the north-west—that all we will do is cause duplication, with costs being repeated 58 times instead of eight times. The changes will make economic co-ordination more, not less, difficult. Also, many of the RDAs have a very good track record of generating inward investment. The move will cost more money and be less effective. We see the same kind of mistake being made in the health service with the scrapping of primary care trusts: that will result in the creation of more organisations that do exactly the same job, with a repeat of the costs.

I mentioned the proposals on VAT, which will take money out of the economy at a time when the recovery is still fragile. The VAT cut had the opposite effect, and I do not accept the arguments of Government Members who say that it did not. The VAT cut resulted in an immediate benefit to the economy, because the money saved was generally spent straight away: people had spare change, and they used it. That had an effect at a very local level, in the shops. Of course, VAT increases hit the poorest hardest, and the Prime Minister himself called VAT a very regressive tax when he spoke at Cameron Direct in May 2009. For once, he really did agree with Nick; Nick told the “Today” programme the same thing on 7 April this year.

In my constituency, 40% of jobs are in the public sector. What happens when those jobs are cut? When police officers, teachers or health workers lose their jobs, they stop spending money with those same small businesses that we need to thrive. They stop spending their money not only in the shops, but on builders, plumbers and other tradespeople. That puts pressure on people who are self-employed and who run small businesses, and not just on public sector workers. There will be an effect not just on the public sector but in the private sector, unless we get the approach right at this stage in the cycle.

In conclusion, we need to look to the banks in solving this problem. We need the banks to lend to small businesses, as Members have said, and we need to look to the banks to take responsibility through a global financial levy. The Government need to reconsider many of the approaches that they are taking, because they are going to make things worse; they are going to increase the deficit and make it harder to grow the economy, and their measures will not work in the way that they hope.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I start by welcoming the hon. Member for Nottingham East (Chris Leslie) to his party’s Front Bench. He has been in the Chamber for most Finance Bill debates, and we have sparred a little bit along the way. I am glad to see him taking part from the Front Bench, but what a baptism of fire this is for him. You were not here earlier, Madam Deputy Speaker—one of your colleagues was in the Chair—but the hon. Gentleman heard an unfortunate tirade from his hon. Friend the Member for Bassetlaw (John Mann), who gave one of the most entertaining speeches that I have heard in this Chamber.

The hon. Member for Bassetlaw had us all going. At one point, we wanted to cheer, but almost immediately afterwards we wanted to boo—and that goes for Members on both sides of the Chamber. His argument developed in quite an incredible way. As my hon. Friend the Member for Northampton South (Mr Binley) said, the hon. Member for Bassetlaw is the only Member who could play for both teams during a football match. It was quite an incredible speech. However, he did talk about deficit deniers, a term illustrated quite well by the hon. Member for Scunthorpe (Nic Dakin) and even better by the hon. Member for Sefton Central (Bill Esterson), who has just spoken.

The hon. Member for Sefton Central spoke about capital spend and investment, but surely he recognises that the previous Chancellor of the Exchequer also wanted to cut capital spend. We understand that the new shadow Chancellor and the shadow Cabinet are following the former Chancellor’s plans for deficit reduction, which involved a reduction in capital spend. It would be fascinating to know whether the hon. Gentleman totally disagrees with his Front-Bench colleagues and thinks that they are completely wrong, or whether his argument was just confused. I really do not know where his argument was going.

[Bill Esterson]

Will the hon. Gentleman give way?

[Alec Shelbrooke]

In one moment; I just wanted to draw on your comment about the US economy. You said that it was a model to follow. There has been an $800 billion investment—or stimulus, if you will—put into the US economy, yet unemployment rates there have grown quite significantly. That is why President Obama’s popularity ratings have fallen.

[Bill Esterson]

I am sure that I did not mention the US economy, but we can check that in Hansard later. I want to pick up the point about capital investment. We need to be clear about the differences between the two sides on that issue. We Labour Members were clear that we would keep Building Schools for the Future and a number of other major projects going. We were looking at a long-term process for reducing the deficit. Those on the Government Benches proposed cutting all capital spending more or less straight away.

[Alec Shelbrooke]

I am glad that I gave way to the hon. Gentleman, because he makes my point. You say that you want to keep the investment going on these capital projects, but you also say that you will reduce the capital budget. How? That does not add up. You simply cannot go on saying that you will spend money here and there, not raise taxes, and carry on borrowing. The argument simply does not add up. I became confused halfway through the speech made by the hon. Member for Bassetlaw—